Set-off: definition and example
Deducting money one party says it is owed from money it owes the other.
By Jack Butler-Kettle · Updated
Guidance for England and Wales. Check the contract, amendments and facts that apply to your job.
What it means in practice
Read this alongside section 111 of the Housing Grants, Construction and Regeneration Act 1996.
Set-off concerns using one asserted monetary claim against a sum otherwise payable. The basis may depend on contract or law, and payment-notice requirements can restrict what is payable in a particular cycle. The mere assertion of a counterclaim does not settle its validity or amount.
Separate the claimed entitlement from the payment procedure. Contra-charge recovery can help examine deductions and their supporting records.
Worked example
The facts
A contractor proposes to deduct £3,000 of alleged damage costs from a £10,000 payment.
What happens
The subcontractor requests the basis and evidence for the alleged £3,000 claim.
It separately checks the applicable payment notices and timetable.
What this shows
The proposed £7,000 net payment is not accepted as correct solely because the arithmetic adds up.